There are various types of insurance policies that you may have but have either forgotten about them, don't understand them or don't know when you can claim. The most common types of policies that we are asked to assit with include the following:
Critical Illness Policies
The most common issues that we are asked to help with in regard to life policies are terminal illness claims; advising what is meant to by the policy being in trust; and how a policy that is in joint names works when one person named in the policy faces a life threatening illness.
Terminal Illness Claims
As part of our assessment of a client's needs, we will ask them if they have life cover. If the answer is yes, we will ask to see the policy to see if the client has a benefit within the cover which is called terminal illness cover. What this means is that if you have been told by your health professional that your life expectancy is probably less than twelve months then you may have a valid claim on you're life policy, relying upon the terminal illness definition. If so, the insurer will pay the full amount insured and the policy will then be cancelled. Occasionally, disputes arise and this where we are able to assist.
The benefit of making a terminal illness claim as opposed to waiting for your loved ones to make the claim after you die, is that you have the benefit of knowing the policy has paid out and you can use the lump sum to pay of a mortgage or debt, paying for your funeral in advance, or make memories such as having a holiday or making gifts. However, you should be aware that if you make the claim during the last twelve months of your life, then it could form part of your estate for the purpose of inheritance tax.
If you live longer than twelve months there is no obligation upon you to repay the benefit.
Insurance Policies in Trusts
When we ask a client if they have life cover and the answer is yes, we might ask one of the following three questions:
Is the policy in trust?
Have you assigned the policy?
Have you nominated the policy?
If you have done any of these then in simple terms what you have done is stated that upon your death you would like the benefit paid to a person or persons listed in a form that you would have completed either when you took out the insurance cover or during the lifetime of the policy.
If you have nominated your spouse or partner to receive the benefit and then divorce, separate or your spose/partner dies then you should immediate contact the insurance company and ask for a new form to be sent to you for completion.
If your policy in trust then it will not form part of your estate for inheritance tax purposes.
If it is not in trust, the insurer may ask for a grant of probate before paying out the benefit.